There They Go Again: Attacking the Renewable Fuels Standard

By Bob Dinneen | July 11, 2012

Calling themselves “The Biofuels Investment and RFS Market Congressional Study Group,” staff members for at least eight U.S. Senators are conducting “a seed-to-wheels examination” of the renewable fuels standard (RFS), setting the stage for legislation in the next session of Congress.

Observers are saying a coalition of odd bedfellows—food groups, environmentalists and the oil industry—are teaming up against the ethanol industry for what is expected to be a multiyear campaign to weaken or repeal the RFS, starting with the 113th Congress which ends January 2015.

To paraphrase Ronald Reagan, “There they go again!”

Back in 2008, with the Grocery Manufacturers Association leading the way, a similar cast of characters conducted a campaign to scrap the RFS. They even persuaded Gov. Rick Perry of Texas—the nation’s leading oil-producing state—to request a waiver from the RFS. They failed then, and they’ll fail again, but not before they confuse the conversation about energy policy with an oil slick of myths, misstatements and misleading analyses.

While the ethanol critics, together with some well-intentioned Senators and staffers, are focusing on incentives for American biofuels, it’s time to take a look at the big picture. The fact is: American ethanol willingly gave up its major tax incentive—the blenders tax credit—at the end of last year. We believe that incentives should help emerging industries to develop and grow, not enjoy eternal subsidies by the nation’s taxpayers.

But that lesson has been lost on Big Oil, which has benefited from federal subsidies for the past century. Instead of exclusively examining renewable fuels, the Senate staffers should also scrutinize the $3.6 billion to $4.5 billion each year in federal tax breaks and other advantages for the oil industry.

Yes, federal incentives have helped the U.S. renewable fuels industry to stand on its own two feet. When the Senate staffers take a look at American biofuels, they should like what they see. With nearly 14 billion gallons of production, ethanol now provides 10 percent of America’s motor-fuel supply. Last year alone, American ethanol eliminated the need for 485 million barrels of imported oil, more than all the oil we import from Saudi Arabia. Moreover, in the midst of a lagging economy, American ethanol supports more than 400,000 jobs, pays more than $8 billion in taxes to the federal, state and local governments, and has lowered the price of gasoline by an average of more than 25 cents per gallon over the past decade.

Even without a seed-to-wheels examination, the Senate staffers should be proud that the renewable fuels standard, which was enacted by both houses of Congress in 2007, has made this progress possible. Without spending a penny of the taxpayers’ money, the RFS has promoted the growth of the American biofuels industry by providing assurance to investors, farmers and the fuel market that renewable fuels will be part of the mix of motor fuels in this country.

Five years after the RFS became national policy, the standard is doing what incentives should do: encouraging innovations such as the development of new technologies that will turn waste products—garbage, woodchips, agricultural residue, corn stover and more—into clean-burning, American-made renewable fuels.

That’s the good news about the RFS. What about the attacks upon American biofuels on environmental and food issues?

On the environmental front, according to the U.S. EPA and a study by the University of Nebraska, ethanol reduces greenhouse emissions by up to 50 percent, compared to gasoline. As for the idea that ethanol production increases food prices—a claim that the Grocery Manufacturers Association keeps making—I’m tempted to quote Ronald Reagan again: “Facts are stubborn things.”

After all, the fact is that farm products such as corn account for only 11.6 cents out of every dollar that Americans spend on food. Even with other farm products, corn prices historically have had little impact upon prices for livestock, poultry, eggs and milk. In fact, food prices track less closely with ethanol production than with energy costs, especially oil prices. Maybe the Senate staffers, and the same coalition that bashed biofuels four years ago, should be examining Big Oil, not renewable fuels.